REPORT TO COUNCIL
SUBJECT
Title
Resolution Increasing the Transient Occupancy Tax Rate from 12.5% to 13.5% effective January 1, 2025; and Introduction of an Ordinance Amending Section 3.25.030 of the Santa Clara City Code to Reflect the Increase in the Transient Occupancy Tax Rate
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
In November 2020, Santa Clara voters approved Measure E which authorized the City to levy an additional Transient Occupancy Tax (TOT) rate by up to 4% from the rate of 9.5% to up to 13.5%. The ballot passed with 73.57% of voters supporting the measure. In FY 2021/22, 2 percent of the 4 percent potential rate increase was implemented effective January 1, 2022.
Outreach regarding the remaining TOT rate increase allowed by the voters was conducted in March 2023 with the large hotels in the City. Public discussion regarding the TOT rate increase was also part of the budget deliberations in May and June 2023.
On June 27, 2023, as part of the Council approval of the FY 2023/24 and FY 2024/25 Adopted Budget, direction was provided to staff to bring forward a separate resolution to increase the TOT by one percentage point effective January 2024. This rate increase was approved during FY 2023/24 as directed. The budget also assumed the remaining one percentage point increase that is allowed by voters would be implemented in January 2025.
DISCUSSION
The introduction of a resolution to increase the TOT rate by one percentage point from 12.5% to 13.5% is consistent with the assumptions in the FY 2023/24 and FY 2024/25 Biennial Operating Budget. The TOT rate increase was a critical strategy to balance the General Fund budget.
The voter-approved tax was approved to maintain and protect the level of essential city services including 9-1-1 emergency medical/disaster preparedness, police and fire protection, bicycle and pedestrian safety, roadways and storm drains, and other vital services including parks, recreatio...
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